Policy on Social and Affordable Housing in Ireland

Policy on Social and Affordable Housing in Ireland 1.0 What is Social and Affordable Housing? 1.1 Social Housing: Definition According to the Irish Council for Social Housing (2010), Social Housing can be broadly defined as accommodation provided by a local authority or approved non-profit housing body for persons who are unable to provide accommodation form their own resources. (www.icsh.ie) 1.2 Affordable Housing: Definition As defined by Dublin City Council (2010), Affordable Housing is a scheme whereby new homes are sold at a reduced price to people who cannot afford to buy a property on their own. (www.dublincity.ie) 1.3 History of Social Housing According to Redmond and Norris (2005), the first instances of social and affordable housing can be tracked back to the mid 1800s. During this time, Europe was witnessing widespread concern about housing conditions of the low income population. This unrest led to state subsidized rental housing to the disadvantaged and low income groups. This form of housing is now known as social housing. Social housing in Ireland has traditionally been provided through two means, these are: Local Authorities and Approved Voluntary Housing Associations. 1.3.1 Local Authority Social Housing In Ireland the Housing of the Working Classes Act (1890), was the first such Act to introduce the concept of the provision for social housing by the local authorities. This act introduced little change to the housing situation at the time. It was not until 1919 when a new housing Act was introduced. This Act was The Housing Act 1919. This Act obliged the local authorities to build and to provide subsidies in areas where there was a need for housing. From the time of introduction of this Act, Ireland saw a substantial period of social housing programmes and completions. This period continued well up until the 1950s. In 1966 a new Act was introduced to modernise the countries outdated legal framework in relation to housing. This Act was The 1966 Housing Act. To date Ireland has benefited from the introduction of 330,000 homes provided by local authorities under social housing initiatives. Currently local authorities manage 108,000 homes under the bracket of social housing. 1.3.2 Approved Voluntary Housing Association Social Housing As defined by the Irish Council for Social Housing (2010), Voluntary housing associations are non-profit organisations formed for the purpose of relieving housing need and the provision and management of housing. The largest of the voluntary housing associations in Ireland at present is the Iveagh Trust. The Iveagh Trust was set up in 1890 by Sir Edward Cecil Guinness, Earl of Iveagh. The purpose of this trust was to provide housing and other amenities to the working classes in Dublin. This was one of the first schemes of its kind to provide such assistance. The introduction of The Capital Assistance Scheme (1984) has provided much needed assistance to these housing associations. Due to the assistance provided by this scheme voluntary housing associations have been able to grow and provide effective assistance in the role of providing housing to those unable to provide housing for themselves. During the mid to late 1990s voluntary housing associations struggled to provide housing due to the increasing land and building costs. According to the National Economic and Social Council (2004), during the 1990s voluntary housing associations produced their lowest output of 285 units. At this time the numbers of people in need of housing was rapidly increasing. The Minister for Housing and Urban Renewal, Mr Robert Molloy T.D., was then prompted to update and improve the schemes available to the voluntary housing agencies. This allowed them to again function effectively in their role to the communities. In 2003 the voluntary housing sector has a managed stock of over 16,000 dwellings. The National Economic Social Council (2004). The Irish Council for Social Housing has recognised the role that the voluntary housing agencies provide in Ireland and has ensured that they have been included in the following current government policy documents: National Development Plan 2007 2013 and Towards 2016. Icsh (2010). 1.4 History of Affordable Housing Affordable housing is a relatively recent initiative in Ireland with the Housing Act 1992 providing the first policies for affordable housing. This Act facilitated access to full ownership in two or more stages to those who cannot afford ownership by their own means. Under this Act the purchaser must initially purchase 40% of the property. The Affordable Housing Scheme 1999 brought forward proposals by the social partnership to provide additional affordable housing on land that is already in the possession of the State and local authorities. As defined by the Department of the Environment, Heritage and Local Government (2009), the Affordable Housing Scheme 1999 comprises developments built on local authority land and in some cases purchased turnkey developments. It was not until the introduction of Part V of the Planning and Development Act 2000 that affordable housing could be considered an effective form of providing housing to those who cannot afford to buy a property on their own. This Act provided an obligation for developers to transfer up to a maximum of 20% of land, units, sites, an equivalent financial contribution or other land or units off site to the local authority for the use to provide social and affordable housing. According to the Department of the Environment, Heritage and Local Government (2009), in 2007 the provision set out in Part V for affordable housing, accounted for 60% of the country wide provision of affordable housing. Today it is through the three measures above that affordable housing is primarily being provided by the local authorities. Sustaining Progress 2003 2005 introduced the Affordable Housing Initiative (AHI). This initiative was responsible for providing 10,000 affordable homes on local authority and State lands. This target has been increased in the current social partnership agreement, Towards 2016, to 17,000 affordable homes. In 2005 the Irish Government decided to establish the Affordable Homes Partnership (AHP). The role of the AHP was to coordinate the delivery of affordable housing by the local authorities in the Greater Dublin Area. The role of AHP in 2007 was extended in to coordinate affordable housing at a national level. During the period of 2006 2008 the AHP actually provided affordable housing direct to the applicant. The AHP when it was created was to take the responsibility of the sites under the AHI. The AHP used this land to deliver affordable housing through land exchanges. According to the Department of the Environment, Heritage and Local Government 2009, only two land exchanges have taken place to date through the AHP. REFERENCES: Social Partnership (2006), Towards 2016. Dublin, Social Partnership Agreement, The Stationary Office. Ireland, Planning and Development Act 2000, Part V. Dublin: Stationary Office Buckley, J. (11 May 2009). Water Services and Affordable Housing Delivery Report. Dublin, Comptroller and Auditor General Special Report, Department of the Environment, Heritage and Local Government. Social Partnership (2003), Sustaining Progress 2003 2005. Dublin, Social Partnership Agreement, The Stationary Office. The Economic Social Council (2004) Housing in Ireland: Performance and Policy. Dublin, The National and Economic Council. The Irish Council for Social Housing (2010), Development of the Voluntary Housing Sector [online], available: http://www.icsh.ie/eng/housing_in_ireland/development_of_the_voluntary_housing_sec, [accessed 2 January 2010]. Redmond, D. and Norris, M.(2005)Setting the Scene: Recent transformations in Irish housinginHousing Contemporary Ireland: policy, society and shelter,ed(s)., Dublin,Institute of Public Administration. Irish Council for Social Housing (2010), History of Hosing Policy [online], available: http://www.icsh.ie/eng/housing_in_ireland/government_policy, [accessed 2 January 2010]. 2.0 Government Policy and Legislation 2.1 Introduction According to the Department of the Environment, Heritage and Local Government (2009), the aim of the Irish Housing Policy is to enable every household to have available an affordable dwelling of good quality, suited to its needs, in a good environment and as far as possible at the tenure of its choice. The following review provides information on the legislative background of the social and affordable housing in Ireland. It examines the acts, initiatives and reports in relation to social and affordable housing and details the circumstances that gave rise to the implementation of Part V of the Planning and Development Act 2000. It also examines the government policies that affect housing affordability and analyses Part V of the Planning and Development Act 2000 and the amendments made in 2002. 2.2 Government Policies that Influence Home Ownership and Prices During the last two decades house prices have been increasing largely due to the demand by the young growing population that were looking to get into the property market. During this period interest rates on property and tax rates on property were particularly suited to home ownership. April 1997 saw the abolishment of the taxation of residential property. After April 1997 stamp duty was the sole tax that one had to pay when dealing with the sale or purchase of a residential property. The Government introduced mortgage interest relief as an incentive to encourage home ownership. Mortgage interest relief is available from the lender to the purchaser, once the owner can prove that the money has been solely applied for the purpose to purchase a property. The reduction in mortgage repayments is catered for by the reduction of tax that the applicant is entitled to. 2.4 Circumstances That Gave Rise to Part V of the Planning and Development Act 2000 The following sections of this dissertation are a review of the contributing factors that gave rise to Part V of the Planning and Development Act 2000. The following sections include a review of the Bacon Reports and other important factors. 2.4.1 Bacon Report 1: An Economic Assessment of Recent House Price Developments During the lead up to the publishing of the first Bacon report, Ireland was experiencing rapid increase in house prices. During this period investors began to flex their muscles in the property market. As a result the first time buyers suffered and began to find it increasingly difficult to enter the housing market. Traditionally first time buyers bought properties towards the lower end of the property ladder. It was these properties that the investors were driven to secure with the aim to rent. The demand for these rental properties was fuelled by the increase in numbers of immigrants entering the country that were not looking to buy properties but to rent properties. This increase in demand for property led to a number of housing agencies to issue warnings that demand for housing would continue to increase and continue to inflate housing prices in the market in Ireland. The first Bacon report proposed interventions by the government to help first time buyers who were at this stage, struggling to get into the inflated property market. The report recommended that the government should strive for a more acceptable rate of house price development and suggested four main areas to focus on for a policy response. These areas are as follows; Achieve better balance between demand and supply in the short term, improve the potential supply of the housing, engage in infrastructure developments and to improve medium and long term planning of the development of the east region. The Bacon report goes on to suggest a rebalancing of existing incentives in favour of the provision of housing at the lower end of the property market. The report highlights that the revenue has overlooked the provision of incentives for providing affordable housing. The report suggests revenue incentives, as a method to increase availability and choice to first time buyers who were struggling to enter the property market. The removal of what was defined as Section 23 incentives for investors and the removal of mortgage interest relief against properties were suggested. A reduction of stamp duty on second hand homes was proposed to increase the scope of available affordable homes in the second hand market. The report suggested a review of residential densities and investment in infrastructure as necessary to help maximise housing supply. The report went on to suggest the idea of introducing an administrative control on housing prices. This idea was later discarded as it was thought that the control of house prices would have the potential to distort the property market. 2.4.2 Government Response to Bacon 1 The government responded to Bacon 1 by decreasing stamp duty rates on second hand houses and also by investing in the improvement of the infrastructure to help realise the potential of development land. The government imposed stamp duty on new houses bought by non owner occupiers. Tax relief for property investors on Section 23 properties was reviewed and the suitability of each property for relief is to be individually assessed subject to the Local Area Plan. Deductibility of interest on borrowings undertaken for investment in property was removed after April 23rd 1998. Action was also taken in the effort to bring down income limits for the shared ownership scheme to a level that was more relevant to the incomes at the time. 2.4.3 Bacon Report 2: The Housing Market, an Economic Review and Assessment The Bacon Report 2 was published after the Government responded to the first Bacon report. This report centres largely on the period directly after the first Bacon Report and observes the impact of the report by assessing the property market during this time. The Report finds that house inflation had slowed since the Governments actions following the first Bacon Report. This slow down was particularly apparent in the market for new housing. Following the first report, the Government removed the deductibility of interest on borrowings for investors while promoting liquidity in the second hand market by changing the structure of the stamp duty system. This Report found that the reduction in interest rates at the time and the easing house price inflation should have made housing more affordable, but in fact affordability remained a serious problem. The Report did warn that a reduction in housing prices may solve the issue of affordability but negative equity would be serious bye-product. The Report made it clear to the Government that they had to centre on filling the void between the price of new houses and the price that was affordable for those who could not afford to buy a new house at the normal asking price. The Report suggested again as it did in the first Bacon Report, that the issue of housing densities should be reviewed, with the possible integration of terraced housing in new developments as a method of providing housing at a lower cost to the developer. The Report did raise the issue of social isolation due to this form of housing. The Bacon Report 2 introduced a concept to develop a scheme for the provision of affordable housing by local authorities and developers. This was the first instance that laid the foundations of the affordable homes scheme. The need to strengthen the existing Planning Acts was highlighted with the objective of modernising the Governments housing policy. The concept of making housing more affordable and improving accessibility to mortgage funding would further increase demand for housing and therefore increase housing prices. As a result the Report suggested to the Minister for the Environment and Local Government to invite proposals from agencies within the voluntary sector as how they could be helped to develop and also how their resources could be applied in a more effective manner with the aim of providing extra housing for the sectors of the community most in need. 2.4.4 Government Response to Bacon 2 On the 9th of March 1999 issued a report titled, Action on the Housing Market. This report contained the Governments response to the 2nd Bacon Report. This report contained initiatives which aimed to maximise and expedite housing supply, secure house price stabilisation, address affordability issues and ensure balanced growth of the property market in the future, (Action on the Housing Market, 1999). Their actions included placing temporary sewerage facilities on land in Dublin to enable the early release of 16000 housing sites. Arrangements were made to identify infrastructural constraints in areas of growth which would reduce delay in housing provision. Draft guidelines for new housing densities were published. These included action on increasing the mix of affordable housing in new developments. An affordable housing scheme was launched shortly before the release of the government response. Through this scheme Local Authorities would provide additional new houses on land available to them which would help lower income households to purchase their own homes. It was stated that the Department of the Environment and Local Government would invite proposals from the voluntary housing sector as to how to expand on the voluntary housing programme. 2.4.5 Bacon Report 3: The Housing Market in Ireland: An Economic Evaluation of Trends Prospects The third Bacon Report was released on the 6th of June 2000. The first point of Bacon 3s executive summary stated that the rate of increase in housing prices, since the release of the first Bacon Report in 1998 had slowed down significantly. The strengthening economy at the time was blamed for the increased difficulty in securing stability in the housing market. House price completions had increased in each successive quarter in 1999. The average price of new houses was still beyond the reach of many average workers. The rate of economic growth at the time meant potential demand for additional 8.000 to 10,000 residential units per annum. The requirement for increased supply in Dublin and the Middle East regions was stressed as increasingly important to control house prices due to the predicted increase in demand in that area. 2.4.6 Government Response to Bacon3 The Government released a report detailing measures which it would take to address housing needs and requirements, as outlined in the third Bacon Report. With regard to Social and Affordable housing, the Government stated that they would increase output of local authority housing that would start at 1,000 units per annum between 2001 and 2006. The Government also proposed measures that would aim to facilitate Local Authorities and Voluntary Bodies to acquire sufficient land that they could provide social and affordable housing. 2.5 Demands for Irish Housing According to Norris and Redmond (2005), there have been significant increases in the demand for housing in Ireland during the economic boom, caused by a combination of economic, demographic and social factors. As mentioned in 2.4.1, the Governments taxation policy was favourable to property investors, particularly during the period following the 1986 Urban Renewal Act which initiated Section 23 Tax Relief. The annual housing inflation rate in 1998 was at 22.5%. At the time this rate of inflation showed no signs of slowing down. The First Bacon Report summarised in 2.4.1, estimated high levels of future demand for Irish housing. The Second Bacon Report pointed to rising rents in the private rented sector. Social rented housing output was not increasing and in 1999 the local authority assessment of housing need showed that 39,716 households were registered on local authority waiting lists, this was an increase of 43% on the previous assessment of housing need which was complied in 1996 , Brooke (2006). The first affordable housing scheme was introduced in March 1999. This scheme provided only 40 affordable houses that year. Part V of the Planning and Development Bill 1999 was structured to address these issues. The Minister for the Environment, Mr Noel Dempsey stated that Part V addressed two major issues in the Irish Housing Policy that allowed people to purchase their own homes and also of the provision of social rented housing. According Mr Noel Dempsey (2000), Part V of the Bill, introduces a major new dimension to planning legislation and contains the most radical and probably the most contentious provisions of the Bill. 2.6 Most Notable Legislation in Relation to Irish Housing Provision The following is an account of some of the Legislation that is considered most important in relation to Social and Affordable Housing. 2.6.1 Housing Act 1966 This Act modernised the legal framework for social housing in Ireland. Is also included the provision for the tenant purchase scheme which allowed local authority tenants to purchase their houses form the local authority. Section 55 of this act relates to a house building programme which each local authority must adhere to in relation to the provision of housing. 2.6.2 Housing Act 1988 This act defined how homelessness would be interpreted in relation to the provision of housing. It allowed the provision of a subsidy to eligible persons against the loans which they had obtained for the purchase or construction of their house. It required local authorities to make an estimation of housing requirements within their functional area both at the present time and over a designated period of time. 2.6.3 Housing Act 1992 This act introduced the Shared Ownership Scheme which allowed a housing authority to grant a shared ownership lease for a term of more than 20 years but not less than 100 years. 2.6.4 The Planning and Development Bill 1999 According to the House of the Oireachtas, the Planning and Development Bill 1999 is to revise and consolidate the law relating to planning and development by repealing and re-enacting with amendments the local government (planning and development) acts, 1963 to 1999; to provide, in the interests of the common good, for proper planning and sustainable development including the provision of housing. 2.6.5 Part V of the Planning and Development Act 2000 Part V of the Planning and Development Act 2000 dealt with housing supply and it came into effect on 1 November 2000. The primary objective behind the introduction of Part V was to obtain land for housing purposes, however the legislation also aimed to improve integration between different social groups by introducing social and affordable housing into private housing estates. The legislation has been the subject of controversy since its inception. Part V of the Planning and Development Act 2000 was resisted by the Construction Industry Federation and the Home Builders Association. These two groups were the primary objectors of the legislation and claimed that Part V would result in a reduction in supply of new private housing, that will increase second hand prices and the buyers of new houses will subsidise the affordable and social housing being expropriated from the industry Norris, M (1999). Part V of the Act did have supporters that described the Act as a landmark step that woul d modernise the planning system in Ireland, improve housing delivery and help reduce undue social segregation in new housing developments. It represents a community and planning gain or return against the windfall profits arising from the development of land Brooke (2006). Part V of the Planning and Development Act 2000 requires that housing strategies be drawn up by planning authorities and integrated into their development plans. Each housing strategy should have regard to the proper planning and sustainable development of an area and should be concerned with the overall supply of housing within the planning authority. In addition, the Act makes communities needs for social and affordable housing a material planning consideration which must be taken account of in formulating development plan policies, preparing a housing strategy and deciding on planning applications or appeals. The Act places a statutory obligation on planning authorities to ensure that sufficient land is zoned for housing in their development plans to meet the projected housing requirements over the plan period and to ensure that an undue shortage will not arise, The Planning and Development Act (2000 p.1.). Most importantly the Act empowers a local authority to attach a condition on a planning permission on land zoned as residential, a requirement for developers to supply up to 20% of the land for social and affordable housing. This requirement was set down in the act with the objective to create all new residential developments that will have a proportion of social and affordable housing contained in within it. The provision of social and affordable housing under Part V only applied to developments that were over 0.1 Hectares in size and contained more than 5 units. Part V only applied to planning applications for permission on land zoned as residential use. This requirement was considered a major flaw as it allowed developers to avail of a loop hole of which they could use to avoid the social and affordable housing requirements set out in Part V. This was particularly apparent on Co. Leithrim, where the town of Carrick-On-Shannon was the only area in the county where zoning provisions where present. Part V of the Planning and Development Act 2000 was commenced on the 1st of November 2000. By the 31st of July 2001 all of the local authorities had amended their development plans and had completed new housing strategies that allowed for the new requirements contained in the Act. 2.6.6 The Planning and Development Amendment Act 2002 This Act allowed developers a greater choice with the provision of social and affordable housing. The Act enabled developers to provide land, sites or housing as an alternative to providing social and affordable housing in each development. The alternatives did however have to be contained within the remit of that planning authority. The developer was allowed another alternative to this requirement under the Act, the developer is allowed to pay the local authority a sum of money equivalent in value to the transfer of the land. This amendment of the Planning and Development Act 2000 is considered by many as a weakening or a cop out to the developers. One of the primary aims of the original Act was to counteract social segregation but now this responsibility is effectively left in the hands of the developer. 2.7 Government Intervention in Irish Housing Provision The following are the most important examples of Government interventions in relation to the Irish housing market. 2.7.1 Local Authority House Building Scheme The 1966 Housing Act places an obligation on local authorities to provide housing for those who cannot afford appropriate housing for themselves. Redmond, D. and Norris, M.(2005)state that 300,000 housing units have been provided to date, since the introduction of the Local Authority House Building Scheme. 2.7.2 House Purchase Loan Scheme The House Purchase Loan Scheme was introduced for those who have had an unsuccessful loan application with a building society, bank or any other lending institution to build or to buy a residential property. This scheme gave a person an alternative option as to avail of a local authority loan. To receive this loan the applicant must not exceed an income of  £40,000 as a single income household or  £100,000 as a dual income household and must have been refused a loan by a bank or building society. 2.7.3 Tenant Purchase Scheme The Tenant Purchase Scheme was introduced under Section 90 of the 1966 Housing Act. Section 90 allowed a local authority to sell on a social house to the tenant. The Act also allowed a local authority to sell a vacant house to whomever they deemed suitable, once the prospective purchaser is in need of housing. 2.7.4 1999 Affordable Housing Scheme The affordable housing scheme was introduce in March 1999. Under this scheme a person can purchase a house from a local authority at a reduced rate to the normal market price. The price of the house is subsidised by the Department of the Environment at  £50,000 per house in the Dublin local authorities and all city councils and at  £31800 for all other local authorities. 2.7.5 Affordable Housing Provided Under Part V of the Planning and Development Act 2000 As summarised in detail above in section 2.6.5, Part V of the Planning and Development Act 2000 empowers a local authority to obtain up to 20% of land zoned for residential use at a reduced rate from a developer to provide social and affordable housing. 2.7.6 Capital Assistance Scheme According to the Department of the Environment (2010), the Capital Assistance Scheme enables voluntary housing bodies to provide accommodation to meet housing needs in special areas, such as of people with disabilities, elderly, homelessness, emigrants or small families. 2.7.7 Capital Loan and Subsidy Scheme The Capital Loan and Subsidy Schemes enable voluntary bodies with the means to provide rental housing for low income families. 2.8 Conclusion Government policy has led to both a high owner occupier rate of housing in Ireland and also high house prices. The aims of the Irish Housing Policy has been greatly affected by government polices. Housing had become less affordable due to previous incentives which encouraged investment and speculation in the market. It was not until the 1990s when the issue of housing affordability arose. This led to the commission of the Bacon Reports on housing in Ireland. The issue of Social and Affordable housing provision in Ireland became more important during the property boom due to rising prices. This looked to have been on its way to rectification in the Planning and Development Act 2000 which brought about a sense of coordination in housing provision. However the potential of Part V of the Planning and Development Act 2000 as a mechanism for ensuring sustainable provision of Social and Affordable Housing without social segregation was greatly depleted with the introduction of the Amendment Act in 2002, which provided too many options for compliance by developers. In the current market downturn, affordable housing in its current guise has arguably lost importance in comparison to social housing due to values of all property falling. Therefore updated legislation in relation to Part V is necessary to rectify the current weakening housing policy. REFERENCES: Norris, M. (1999) Mixed-Tenure Housing Estates: Development, Design, Management and Outcomes. Dublin, The Housing Unit. Dempsey, N. (2000) Planning and Development Bill 2000, second stage, 2nd February, Dà ¡il Éireann, available: http://historical-debates.oireachtas.ie/D/0513/D.0513.200002020018.html [accessed 23 February 2010]. Brooke, S. (2006) Building for inclusion? : Housing output and part V of the Irish Planning and Development system. Dublin. Focus Ireland. Bacon, P and Mac Cabe, F. (1998) Bacon Report 1: An Economic Assessment of Recent House Price Developments. Dublin, Stationary Office, Minister for Housing and Urban Renewal. Bacon, P and Mac Cabe, F. (1999) Bacon Report 2: The Housing Market an Economic Review and Assessment. Dublin, Stationary Office, Minister fo